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A company can only act through people. Contracts are signed by directors, managers, sales staff and sometimes outside agents, and in a busy SME nobody checks every signature against a board resolution. Most of the time that works. Problems start when someone signs something the company never approved: a long exclusive distribution deal, a guarantee, a discount nobody agreed to, or a supply contract signed by a manager on the way out.
The question is then simple to ask and harder to answer: is the company bound? The answer depends on whether the person had actual authority, whether the company made it look as if they had authority, and what the other side knew. This article explains how Singapore law approaches the issue from the company’s side, using the Companies Act 1967 and recent Singapore cases, and what the board should put in place so that the question does not arise.
Short answer
A Singapore company is bound by a contract signed by someone with actual authority, express or implied, or with apparent authority created by the company’s own words or conduct. It is generally not bound where the only representation of authority came from the signatory and the other party’s reliance was unreasonable, unless the company later ratifies the contract.
How a company makes contracts
Section 41(3) of the Companies Act 1967 provides that contracts on behalf of a company may be made in writing signed by, or orally by, any person acting under its authority, express or implied, and that a contract made in this way binds the company. For deeds, section 41B allows a company to execute a document without a seal by the signature of a director and the secretary, two directors, or one director in the presence of an attesting witness. Section 41A confirms that a company need not have a common seal at all.
So the core question in most disputes is not about formalities. It is whether the person who signed was acting under the company’s authority.
Actual authority
Actual authority is the authority the company has in fact given. It may be express, for example in a board resolution, a delegation of authority policy, a power of attorney or an employment contract. It may also be implied from the person’s role and from the way the company and that person have dealt with each other.
In Alphire Group Pte Ltd v Law Chau Loon and another matter [2020] SGCA 50, the Court of Appeal found that investors in a company had implied actual authority to agree a settlement on the company’s behalf. The court said implied actual authority may be inferred from conduct and circumstances. It noted that the company had collected S$1 million under the settlement and only objected to the investors’ authority about five months later, which the court described as a tactical decision. The settlement bound the company.
Two limits on actual authority come up often:
- Scope: authority to do routine things does not automatically extend to unusual ones. In Jiangsu New Huaming International Trading Co Ltd v PT Musim Mas and another [2024] SGHC 81, the High Court said that even if an individual had authority to enter into sales transactions, that was not enough to bind the principal to a long-term exclusive agency agreement.
- Honesty: actual authority is impliedly conditioned on being exercised honestly. In Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd [2009] SGHC 197, a finance manager who obtained bank facilities in his employer’s name with forged board resolutions had no actual authority, because fraud nullified it.
Apparent (ostensible) authority
Even without actual authority, a company may be bound if it represented to the other party that the person had authority, and the other party relied on that representation. This is apparent or ostensible authority.
The representation must come from the company
The key point is that the representation must be made by the company, through someone with actual authority, and not merely by the person who signed. In the Skandinaviska litigation, the banks argued that the finance manager appeared to have authority. The High Court held that his ostensible authority had to be founded on words or conduct of the company itself. On appeal, in Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd and another and another appeal [2011] SGCA 22, the Court of Appeal agreed that the company had not held him out as having authority to accept the facilities or to vouch for the board resolutions. His title carried little authority, and the banks knew only what he told them.
Reliance must be reasonable
In Jiangsu New Huaming, the court applied the same framework: a representation of authority by someone with actual authority, reliance by the other party, and inducement. It found that the claimant’s reliance was not reasonable, because the contract was highly one-sided, it had been signed without the amendments the principal usually required, and no reasonable inquiries were made. A counterparty that knows, or has reason to believe, that a deal is against the principal’s interests will find it hard to rely on apparent authority.
Limits in the constitution and the indoor management rule
Companies sometimes assume that a restriction in their constitution, such as a cap on what directors can borrow, protects them against outsiders. Generally it does not. Section 25A provides that a person is not deemed to have notice of the constitution merely because it is registered with ACRA or available for inspection. Section 25B provides that, in favour of a person dealing with the company in good faith, the directors’ power to bind the company, or to authorise others to do so, is deemed free of any limitation in the constitution, including limits from shareholder resolutions or shareholder agreements. The outsider is not bound to enquire, and good faith is presumed unless the contrary is proved. Section 25 separately provides that an act is not invalid merely because the company lacked capacity or power to do it.
Internal limits still matter, but mainly inside the company: shareholders can complain, and directors who exceed them may be personally accountable.
Who signed, and is the company likely to be bound?
| Who signed | Usual starting point | Points to check |
|---|---|---|
| Board, by resolution, or two directors under section 41B | Company bound | Was the resolution genuine and properly passed? |
| Managing director or CEO | May be bound within the usual authority of that office, if the board has put the person in that role | Delegation from the board; whether the deal was unusual |
| Manager or employee | Bound only within actual authority or if the company held them out | Delegation policy, past dealings, what the company itself told the counterparty |
| Former employee or resigned director | Usually not bound | Whether the company told the counterparty, and whether ACRA records were updated |
| Anyone acting fraudulently | Usually not bound by actual authority | Whether the company’s own conduct created apparent authority |
Ratification
A company that was not originally bound can choose to adopt the contract afterwards. Ratification may be express, such as a board resolution approving the deal, or inferred from conduct, such as accepting the benefit, paying invoices or performing the contract without objection. The lesson of Alphire is that a company which takes the benefit and stays silent for months may find that a court treats it as bound. For contracts signed before a company was incorporated, section 41 contains specific rules; see our article on pre-incorporation contracts.
Where the company is not bound
If the company is not bound, the counterparty may look elsewhere. The person who signed may face a claim for breach of warranty of authority, and an employee who exceeded authority may also face claims from the company under the employment contract or for breach of duty. Separately, the company may still face claims in tort for its employees’ wrongdoing; our article on vicarious liability explains when that arises. If the person who signed has since left and taken clients with them, see our guide on former employees taking clients and confidential information.
What the company should do
- Board minutes and resolutions: pass a clear resolution on who may sign what, with financial limits, and record approvals of significant contracts, borrowings and guarantees. Our article on corporate resolutions for loans, guarantees and security explains what lenders typically expect.
- Delegation of authority: keep a written authority matrix, give it to staff, and update it when people change roles.
- Registers and ACRA filings: lodge changes of directors and officers with ACRA on time and update the register of directors. An out-of-date business profile can help a former officer appear to still act for the company.
- Tell counterparties: when a manager or director leaves, write to key clients, suppliers and banks, and update bank mandates.
- Signing tools: control access to e-signature accounts, company stamps and email signatures. See our guide to electronic signatures in Singapore.
- Accounts: if an unauthorised contract is disputed, the company’s accountant should consider whether a provision or a contingent liability disclosure is needed in the financial statements.
- Act quickly: if the company discovers an unauthorised deal and does not want to be bound, it should say so promptly and avoid taking any benefit under it.
Frequently asked questions
Is a company bound just because the contract has the company stamp on it?
Not necessarily. Section 41A makes even a common seal optional, and a stamp does not by itself prove that the signatory had authority. In Jiangsu New Huaming, the agreement bore the principal’s company stamp but no signature of an authorised representative, and the claim failed.
Our constitution says directors cannot borrow above a limit. Can we rely on that against the bank?
Generally not against a lender dealing in good faith. Under section 25B, a person dealing with the company in good faith is not bound to enquire into limits on the directors’ powers and is presumed to be in good faith unless the contrary is proved.
Can an employee’s job title create apparent authority?
A title can be part of the company’s conduct, but it may carry little weight on its own. In the Skandinaviska appeal, the Court of Appeal found that the finance manager’s title carried little authority to bind the company to the facilities.
What if we kept performing the contract before we realised it was unauthorised?
Performing or accepting benefits can amount to ratification once the company knows the relevant facts. Take advice as soon as the problem is discovered, and avoid further performance until the position is clear.
Does a former director still bind the company after resigning?
Not by actual authority. The risk is apparent authority, where the company has not told counterparties or updated its records. Prompt ACRA filings and notice to banks and key contacts reduce that risk.
Need a lawyer?
This article is general information about Singapore law for companies, directors and shareholders. It is not legal advice, and it does not take account of your circumstances. Raffles Corporate Services Pte Ltd is a corporate service provider, not a law practice, and does not give legal advice.
If someone has signed a contract in your company’s name without authority, or a counterparty says your company is bound by a deal it never approved, we can introduce you to an experienced Singapore law firm that handles commercial contract and agency disputes. Tell us briefly what has happened and we will connect you.
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We can also take care of the corporate side for you: board and shareholder resolutions, register updates and ACRA filings.
Conclusion
Whether a Singapore company is bound by a contract signed on its behalf turns on actual authority, apparent authority created by the company itself, and the reasonableness of the other side’s reliance, with sections 25A and 25B of the Companies Act protecting outsiders who deal in good faith. Companies protect themselves best with clear board resolutions, a written authority matrix, up-to-date ACRA records and prompt action when something goes wrong. The same discipline helps in related disputes, such as claims between co-guarantors of company debts. The provisions discussed above are in the Companies Act 1967, and officer changes are filed through ACRA. For help setting up signing authorities, resolutions and filings, speak to Raffles Corporate Services.
The Editorial Team, Raffles Corporate Services